Location matters

Two very interesting points by veteran analyst Richard Holway on his site UKHotviews .

The first concerns Dell’s decision to switch production from Ireland to Poland, hitting, axing 1,900 jobs in the process. With Dell contributing 5 per cent of Ireland's GDP this is a pretty savage blow.

Holway quotes the Times, quoting a Dell worker, who states:

“This is not about a company that is in trouble. This is about greed, corporate greed. They're going to Poland because apparently they can make an extra 3 per cent.”

He goes on to state:

“I have long bemoaned the fact that we don’t have much of a “UK-owned” tech industry left – whether that’s software, IT services or hardware. I’ve been told that we live increasingly in a ‘Global World’ and that ownership doesn’t matter. Although I have to agree, I have continued to believe that the ‘Location of Control’ – the HQ, where the CEO is located, the main stock exchange listing, the main R&D centre – DO MATTER. The spin off (legal, audit, PR etc) and ‘cluster effect’ (graduate jobs etc) are significant.

The other advantage only occurs in a downturn. The ultimate ‘loyalty’ towards a ‘locality’ I believe only becomes apparent in a downturn. Offices and plants outside the ‘location of control’ will be closed/moved on purely economic grounds. Loyalty will go out the window; ultimately remaining only at the ‘location of control’.

Will Microsoft close Seattle? Will Capgemini close Paris? Will IBM abandon New York? More topically, will the US Government support its car makers’ plants outside the US? If US tech manufacturers get a bail out (unlikely) do you think the US Government will care about UK jobs?”

What do you think?

Holway’s second point runs under the headline “ You don’t know who is swimming naked until the tide goes out ”. A pretty apposite comment on the Satyam debacle and other corporate governance scandals.

Give it a read. We have been warned.


Copyright © 2009 IDG Communications, Inc.

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